presenters: amanda roberts western states learning corp. amy slover panhandle plains student loan...
TRANSCRIPT
Presenters:Amanda Roberts
Western States Learning Corp.
Amy SloverPanhandle Plains Student
Loan Center
Ed BrandtACS
Eileen HerbertSallie Mae
Wanda HallEdfinancial Services
Income-Based Repayment
Team FFELP IBR Workgroup
Consist of over 40 NCHELP and SLSA members
Representatives from 25 member organizations
Two calls per week Subcommittee calls in between weekly
Reviewed Common Manual draft policies
Team FFELP IBR Workgroup Eight (8) Subcommittees
LaRS Disclosures Partial Financial Hardship documentation Deferment/Forbearance/Capitalization Forms IRS Reporting Default Claim Filing and Rehabilitation Training
Course Outline
What is IBR? Eligible Loans Key Terms Repayment Disclosures
Interest Capitalization & Forbearance
Tracking Forgiveness Interest and
Special Allowance
What is IBR?
IBR is a new repayment plan introduced by the College Cost Reduction and Access Act (CCRAA)
New repayment plan for borrowers designed to help borrowers experiencing a “partial financial hardship”
Available to FFELP and DL borrowers beginning July 1, 2009
Eligible loan types Available for:
Stafford, SLS, Grad PLUS, and federal Consolidation loans that do not include Parent PLUS loans. Perkins, HPSL, HEAL, and FISL loans are eligible if included in a FFELP or DL Consolidation loan
Not available for: Parent PLUS loans or Consolidation loans that
include Parent PLUS loans Private (or "alternative") student loans, state
loans, and other loans not guaranteed by the federal government
What is partial financial hardship (PFH)? Based on income and family size: borrower
must provide permission for IRS to disclose AGI "and other tax return information" as well as family size certification
Occurs when the annual amount due on all of the borrower's eligible loans (as calculated under a standard 10-year repayment plan) exceeds 15% of the difference between the borrower's adjusted gross income (AGI) and 150% of the poverty guideline for the borrower's family size
Adjusted Gross Income (AGI)
Borrower who files married/joint: both spouse's AGI are considered in determining payment amount
Borrower who files married/separate: only the borrower's AGI and debt are considered in determining payment amount
Family Size Must be certified annually Includes borrower, spouse, children,
unborn children if receiving >50% support, and others who live with the borrower and receive >50% support during that year
Support includes money, gifts, loans, housing, food, clothes, car medical and dental care and payment of college costs
Family size defaults to one (1) if borrower does not provide required information
Standard-Standard Payment amount calculated when the
borrower initially enters repayment based on a 10-year term, regardless of loan type
Will need to calculate this amount regardless of whether or not the borrower chooses the standard repayment plan when initially entering repayment
This amount is used to determine eligibility of any payments made outside of the IBR repayment plan to count towards the 25 years (300 payments) for IBR loan forgiveness
Permanent-Standard
Payment amount calculated immediately preceding entering IBR on loan balance outstanding
Based on a new 10-year term This is the maximum payment amount
the borrower will ever be required to make, unless the borrower requests to leave the IBR plan
Expedited-Standard
Payment amount calculated once a borrower voluntarily elects to leave the IBR plan
Amount is calculated using the remaining term based on a standard repayment plan, based on loan type (maximum of 10 years for Stafford and GradPLUS, maximum of up to 30 years for Consolidation loans, based on original loan balance)
Expedited-Standard
Unlike a deferment or forbearance, the borrower does not regain the months spent in IBR when recalculating terms upon leaving IBR completely
ED has clarified that a borrower MUST enter a standard (expedited) repayment plan when terminating repayment under IBR, however, a borrower is not required to stay in the standard (expedited) 10-year repayment plan
REPAYMENT
Disclosures Lender must provide borrower with notice that
informs of the availability of IBR At time of offering a borrower a loan At time of offering a borrower repayment options
Information may be provided in a separate notice or as part of the other disclosures
Notice must inform the borrower of: Eligibility for ISR and may be eligible for IBR, including
through loan consolidation Procedures by which the borrower can elect ISR or IBR;
and Where and how the borrower may obtain more
information concerning ISR and IBR
Repayment Terms Can extend beyond 10 years regardless
of the amount of the eligible debt Will need to track minimum and
maximum payment amounts over life of loan
Payment application order different than other repayment plans- Must apply IBR payments first to interest>
then to collection costs > late charges > principal
Determining PFH Eligibility verification occurs initially and each
subsequent year Eligibility and minimum monthly payment is
re-evaluated annually If borrower selects IBR but fails to submit
documentation, holder required to place in standard repayment
Borrower can elect to remain in IBR even if/when no longer meets hardship requirement
Payment Amount Calculation
15% [AGI – (150% Poverty line applicable to family size)] divided by 12
Calculated payment amount less than $5 = $0 payment amount due
Calculated payment amount between $5 - $10 = $10 payment amount due
Payment Calculations –Multiple Loans/Holders
The borrower must contact each loan holder separately to request IBR
The loan holder must include all eligible loans held by them in the IBR plan, unless the borrower requests otherwise
Each loan holder must include the loan amounts of all eligible loans held by other lenders in the payment calculations, then prorate based on the principal amount held by that loan holder
After prorating, the loan holder would apply, if needed, the $5 and $10 payment rules to the loans held by that loan holder
The Department approved the use of NSLDS by lenders to determine the amount owed on eligible loans held by other loan holders
Recalculation of Payment Amount Can occur when borrower:
- no longer has partial financial hardship (PFH)- no longer wants IBR
Maximum monthly payment must not exceed monthly payment calculated under a 10-year repayment plan at the time they entered IBR (permanent-standard amount)
Repayment period may still exceed 10 years when they no longer qualify for PFH or do not renew their IBR (permanent-standard)
Repayment period is limited to 10 years if borrower chooses to leave IBR completely (expedited-standard)
Zero Payments
Credit bureau reporting = Cannot become delinquent for a $0 installment amount, therefore would not report delinquency
Cannot be paid-ahead
Paying Ahead Borrower permitted to pay ahead but
forgiveness may not occur until reach 25th year
Cannot pay ahead $0 monthly payment amount
New Forbearance Guidelines
Administrative Forbearance is authorized: To resolve any delinquency prior to the
granting of a new repayment plan (cap permitted);
For up to 60 days while the lender confirms eligibility for forgiveness; and
For the guarantor’s forgiveness review period, in the event of a denied claim
Interest Capitalization
Interest must be capitalized:
When borrower leaves PFH voluntarily or no longer has a PFH
When borrower leaves IBR to go to Expedited-Standard
When guarantor denies forgiveness (lender has the option to capitalize in this case)
Tracking
Payment Tracking
Need to “bank” each month in which the borrower:
Makes a payment under a PFH plan, including a payment amount of $0
Makes payments totaling at least the lesser of the Standard-Standard payment amount or the Permanent-Standard payment amount
Used Economic Hardship Deferment
Payment Tracking
ISSUES
Months must be tracked beginning in July 2009 in all cases
May need to re-evaluate months already tracked, once the “Permanent-Standard” payment amount is established
Payment Tracking
OTHER ISSUES (continued)
After banking a total of 300 qualifying months, if the borrower’s account is not yet paid in full, lender/servicer must file a claim for forgiveness
Payment tracking
EXCEPTIONS
If borrower chooses to leave IBR altogether and use the expedited-standard payment amount, any payment they make under that plan must be at least the lesser of standard-standard and permanent-standard
Payment tracking
OTHER ISSUES (continued)
If taking on a Rehab Loan, must obtain qualifying months already achieved from the guarantor and continue tracking from there
Payments collected by the original lender/servicer from July 2009, through the date of default may count toward the 25 years
Payment tracking
OTHER ISSUES (continued)
If borrower chooses to consolidate a loan on which the “25-year clock” had already started, the clock will re-start on the Consolidation loan
Payment tracking
OTHER ISSUES (continued)
Borrower cannot achieve early forgiveness by, for example, doubling up on payments. 300 months must elapse regardless.
No forgiveness will be granted prior to July 1, 2034
Payment tracking
OTHER ISSUES (continued)
Pre-payments made prior to July 1, 2009, even if they satisfy installments due after that date (i.e., prepayments), do not count toward the 25-year requirement
Forgiveness
Conditions for Forgiveness
Borrower must have received a partial financial hardship IBR repayment plan at least once
Borrower must have made 300 eligible payments
25 years must have elapsed Any loan amount forgiven may be
taxable
What counts as an eligible payment?All payments made on or after July 1, 2009, could
potentially be eligible if they fall into one of the eligible categories:
Partial financial hardship payments made under IBR, including $0 payment amounts
Payments made at the permanent-standard amount
Any payment made that was not less than the standard-standard payment amount
Each month the borrower is granted an Economic Hardship Deferment on or after July 1, 2009
What does NOT count as an eligible payment?
Payments made while in default Payments made during rehabilitation Payments made in an amount less
than the standard-standard or permanent-standard amount
Payments made prior to July 1, 2009
Counting 25 years Begins no earlier than July 1, 2009 Begins the date the borrower made an
eligible payment or received economic hardship deferment before qualifying for IBR
Who did not make a payment or receive economic hardship deferment before receiving IBR, the 25 years begins on the date the borrower made a payment under IBR
• If a borrower consolidates, the 25 years starts over and does not count any payments or deferment period received on underlying loans prior to consolidation
Processing and Payment
Loan holder must request payment from guarantor no later than 60 days from date holder determines eligibility
Within 45 days, the guarantor must determine eligibility and either pay the loan holder or return the request to the loan holder
Loan holder must notify borrower of guarantor’s determination within 30 days
Loan holder must also provide the borrower with general information on what it believes is the current tax treatment of such forgiveness amounts and is encouraged to refer borrowers to the IRS for further information
If request is denied, lender may grant forbearance from the date the borrower’s repayment obligation was suspended until a new payment due date is established
Processing and Payment The Department will pay outstanding
principal and accrued interest for eligible borrowers
If the guarantor pays more than the outstanding balance on the eligible loans, the loan holder must return any excess amounts to the guarantor
Once forgiven, the loan holder must promptly return any payment received to the sender
Interest and Special Allowance
Interest Accrual
Interest Accrual
Interest accrues as normal
Subject to negative amortization - borrower’s payment amount under a Partial Financial Hardship (PFH) may be less than the accrued interest
What to do with the difference?
Interest Accrual
If the portion of the scheduled monthly PFH payment amount attributable to the subsidized loans is less than the monthly accrued interest on those loans, the Department will pay the difference, for up to three years
Interest Accrual
On the unsubsidized loans, and on all loans after three years, accrued interest will simply build up and, in certain circumstances, capitalize
3-year Interest Subsidy
Interest subsidy applies: Only while the borrower is on IBR
To both subsidized Stafford loans and the subsidized portion of Consolidation loans
3-year Interest Subsidy
Three-year period begins when the borrower is first placed on the IBR plan
Applies at the loan level, so loans that enter IBR at different times will each get the full three years
3-year Interest Subsidy
3-year period continues unabated, even if the borrower exits PFH or consolidates their loan after having already entered PFH
Only one exception: Periods of Economic Hardship Deferment
3-year Interest Subsidy
What if PFH ended during the quarter? Do not include in the cap the unpaid
interest during PFH (on the subsidized loans) as would for deferment
Determine what the borrower paid toward the PFH payments and see if that was less than the total accrued interest for the PFH period
If so, bill the Department for the difference
3-year Interest Subsidy
BILLING MECHANISM:
Quarterly, as part of the LaRS process
3-year Interest Subsidy
OTHER ISSUES
The interest subsidy is not contingent upon the borrower actually making a payment, even if the monthly payment amount under PFH is greater than $0.00
Stoppage of Interest Accrual
Federal interest subsidies stop:
On 61st day after lender/servicer determines that the borrower has qualified for forgiveness
Special Allowance
Special Allowance
During periods of PFH, lenders/servicers can bill the Department for Special Allowance not only on the average daily principal balance, but on the accrued interest as well
Includes accrued interest billed to the Department during the first three years of IBR
Special Allowance
Special Allowance is billed based on the average daily accrued interest amount
Average daily accrued interest is computed by totaling up the unpaid interest for each day of the quarter on which the borrower was in a PFH and divide this total by the number of days in the quarter
Round resulting value to the nearest whole dollar
Special Allowance
When paying Special Allowance on the average daily accrued interest, the Department will use the same formula applicable to the loan itself, but with an interest rate of 0%
Special Allowance
REPORTING MECHANISM:
New SAP Codes?
OR
Same SAP code as the Average Daily Balance, but with an interest rate of .00?
Dear Partner Letter anticipated
Special Allowance
Average Daily Accrued Interest, like the Average Daily Balance, is subject to retroactive account adjustments
For example, if you apply a payment retroactive to a date in the previous quarter, you would need to adjust the average daily accrued interest for that quarter accordingly and report a billing decrease on the next LaRS report
Team FFELP IBR Workgroup
Workgroup Co-Chairs – Wanda Hall, Edfinancial Services
[email protected] Bob Sandlin, NTHEA HESC
[email protected] Rob Sommer, Sallie Mae
Questions?